Robert Key: That is very good news. The problem is that local authorities provide or subsidise transport in the case of school transport, youth services, social services, bus subsidies, car share schemes and over-60s free bus travel; the NHS provides ambulances, hospital car services and hospital patient transport; and Royal Mail provides for 50,000 people a year travelling in their post buses—we have so much ad hocery that it is time for a Government strategy. At the moment, the poorest in our communities always suffer, particularly in large rural areas. I would like this issue to be pushed down to local authority level at the same time as having a coherent strategy and working out what is the cost of not having a coherent and sustainable transport policy.

John Healey: The first thing to say is that LINks were only established last year through the Local Government and Public Involvement Act in Health Act 2007. Money was available for local authorities to start their work in ensuring that those were set up properly from April last year. Every local authority has a clear legal duty to ensure that they are established. If my hon. Friend feels that his local authority is falling short in that legal duty, I encourage him to let me have the details, and I and my hon. Friends in the Department of Health will look into the matter.

Hazel Blears: I am sure that the hon. Lady is aware that empty property in this country has been subject to taxes for 40 years or so. We are not talking about a new innovation. In fact, the extra reliefs that have been introduced as a result of the pre-Budget report will give relief amounting to £205 million to businesses that would otherwise have to pay those taxes. That is not an inconsiderable sum and is a result of a decision made by this Government. She talks about inflation, but she will know that local authorities had to cope with the spike in fuel and energy prices. Although inflation is now coming down, they have had to cope with real volatility in the system. Therefore, it is important that business rates make their proper contribution to local services. Again, we are bringing forward a raft of measures, ranging from skills support, training and help for apprentices to support for small businesses, the enterprise guarantee system and the working capital system. Those are all innovative steps taken by this Government in the teeth of opposition from the Conservatives, who simply want to stand on the sidelines, wring their hands and do nothing to help people through this difficult period.

Margaret Beckett: Any property that is put on the market has to have a fully completed home information pack, and I am sure that that one will. I am not familiar with the case that the hon. Gentleman has mentioned, but I am sure that the law will be met by those who are placing that property on the market, as with any other. I would simply to say to him what I have already said to his hon. Friends: this provision is of real potential benefit to consumers, and I wish I could say that it was untypical of the Conservatives not to share that concern.

Phil Wilson: I welcome my right hon. Friend the Secretary of State's comments in recent weeks about it being incumbent upon Government to confront and address the racist propaganda that some organisations put around in some of our communities. What are her views on this, and what else can the Government and her Department do to make sure that this vile propaganda is expunged from our local communities?

Ken Purchase: It is welcome for house owners with mortgages that interest rates have fallen, thus reducing their monthly payments. The other side of that is, as my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins) mentioned, that council tenants face rent increases of between 5 and 6 per cent. Although it is within the gift of councils to ameliorate that, the grant regime structures the outcome, and I understand that this year it has led to the Treasury benefiting to the tune of about £200 million. Does she see appreciate that that is not equitable and that, in the interests of introducing good Labour policy, there should be either a complete stop on this year's rent increases or at least a considerable reduction in the proposed increases?

Margaret Beckett: I am happy to join my hon. Friend, who I know takes a great and expert interest in these matters, in congratulating her local community and welcoming the housing provision to which she refers. I certainly take her point, and I am mindful of the fact that not just in her constituency but across the country, one difficulty is that even where housing has been provided, it is not always the larger housing that families need. I take her point entirely and I am grateful to her for making it.

Financial Crisis

Stephen Timms: I beg to move,
	That this House takes note of European Union Documents No. 14938/08, Commission Communication: From financial crisis to recovery: A European framework for action and No. 16097/08, Commission Communication: A European economic recovery plan, and endorses the Government's approach to discussions with European partners on these issues.
	I welcome the opportunity to debate the Government's approach to the European economic recovery plan, alongside the related European Union documents. The world economy is in a serious downturn arising from financial system dislocation. The size and speed of that downturn warrant substantial and immediate action from Governments. Developments in the United States sub-prime mortgage market were the original trigger for the distress in the financial markets that escalated throughout last year, leading on to a severe downturn in economic activity across the world.
	What began as disruption to the functioning of specific credit and money markets has spread and intensified to the extent that all financial markets have been affected. Financial institutions and financial systems in both developed and emerging market economies have been placed under severe pressure and, as credit conditions between banks have become tighter, their ability to lend to businesses and consumers has been restricted. That scarcity of credit for businesses and consumers has further contributed to the downturn and produced a real effect on the lives of individual citizens at home and in other countries, too. That is why it is right and necessary for Governments across the world to take bold action now to support the economy. My right hon. Friend the Chancellor of the Exchequer yesterday set out the further measures that the UK Government are putting in place.
	In October, we took the lead with steps to stabilise the banking system. The euro-area summit of 12 of October agreed a co-ordinated approach based on the UK model. In the pre-Budget report, my right hon. Friend the Chancellor announced measures worth around £20 billion between now and April 2010. That fiscal stimulus includes timely, temporary and targeted measures to support demand and to provide real help to people and businesses through these difficult times.

Stephen Timms: I think that the right hon. Gentleman is familiar with the five tests that the Government have set as preconditions for considering entry to the single currency. I shall take his contribution as a statement in support of those arrangements.
	This crisis has impacted on all members of the European Union. The euro area is already in recession, after a fall in GDP for the second consecutive quarter. The latest European Commission forecast expects GDP in the largest member states to fall by between 1¾ and 2¼ per cent. The European Central Bank has taken action in line with the Bank of England and dramatically reduced interest rates, in some cases in co-ordination with cuts made by the G7 central banks.
	The European Union now has the opportunity to use its structures and institutions for decisive, co-ordinated action to respond to the crisis and facilitate recovery. At the end of October, the Commission published a communication outlining initial proposals on how the EU can take united, unified and co-ordinated action to address the crisis. The initial response was later developed into a full framework.
	On 26 November, the Commission published its European economic recovery plan to inspire a co-ordinated response to the downturn. A plan based on that was subsequently agreed by the European Council, and it has two key pillars. First, the Commission calls for a fiscal stimulus from member states equivalent to around 1½ per cent. of European Union GDP, to be made up of contributions from member states and the EU itself. This pillar is consistent with measures that we announced in the PBR, including supporting general VAT reductions and front-loading investment projects in infrastructure, transport and climate change, as well as further measures for small businesses. France, Germany, Italy, Spain and the Netherlands have all since announced stimulus packages along those lines.
	The plan further stressed that, in these exceptional times, it was necessary for Governments to have flexibility to increase borrowing in line with measures to support the economy, and, as I said a few moments ago, that member states may breach the 3 per cent. of GDP deficit limit outlined in the stability and growth pact. The conclusions from the December European Council reiterated that the revised stability and growth pact provides flexibility for member states to implement measures in the recovery plan without compromising public finances in the medium term. In line with that thinking, we have set out plans for a sustained fiscal consolidation from 2010-11, when the economy is expected to be recovering and able to support a reduction in borrowing.
	The second pillar comprises priority actions grounded in the Lisbon strategy for growth and jobs and designed to adapt our economies to long-term challenges to take advantage, when growth returns, of the new opportunities that there will then be. They include employment support initiatives, enhancing access to business financing, reducing administrative burdens, and promoting the rapid take-up of green products and technologies. We are taking action in those and other areas to help individuals and businesses through this crisis, and other members of the European Union will take similar steps in the spirit of this plan. These measures will help to provide us and our European partners with the means to take full advantage when the economy begins to recover.
	The plan highlights the role of the European Investment Bank in mitigating the effects of the crisis. The EIB has put together a package of €30 billion in loans to help small to medium-sized enterprises, and that is up 50 per cent. on its usual lending to the sector. UK small businesses stand to benefit to the tune of £4 billion by 2011. The plan also proposes to revise the EU budget's financial framework to fund energy interconnections and broadband infrastructure. We are looking forward to examining those proposals in more detail, as the detail becomes available, and discussing them with our EU partners. We very much welcome publication of the plan and the agreement at the December European Council on priority actions at national and EU level.

Philip Hammond: The motion invites the House to take note of the Commission papers and to endorse the Government's response to them. Hon. Members will have noted that the Financial Secretary told us that the Chancellor has already gone to ECOFIN to discuss them, so people will draw their own conclusions about the Prime Minister's commitment to parliamentary government and how much our deliberations are valued.
	There is much that we can agree on in the Commission paper: its analysis of the situation that we face; the focus on the need to deliver, at last, on the Lisbon agenda; the use of green taxes to drive demand for energy-efficient products; and, especially, the welcome commitment to open markets and free trade. However, if one reads these two documents together, one cannot avoid the impression that a significant part of the purpose in producing them is to claim ownership of the agenda—that instead of seeing a crisis for EU citizens, the Commission sees an opportunity to extend its competence and exaggerate the role that it has played. The Commission says:
	"The EU was able to take collective action when the pressure on financial markets was at its most intense"
	and that this
	"national action inside a set of clear EU principles"
	proved to be the right approach. I have to be fair to the Minister and say that the Government appear to be alert to this case of mission creep, because all they will allow in their response is that the Commission's document is
	"a helpful contribution to the ongoing debate",
	while emphasising that the challenges are very different in the UK, the EU and the international community. That is "Yes Minister" speak for "We've read your document and we intend to ignore it." The Minister needs to be more robust, because the history of UK Ministers dealing with mission creep from the Commission is that unless they are very robust and clear in setting out their case, they tend to find that they get overruled in due course.
	As the Minister said, the context of these issues is global. The problems that arise from this crisis must be dealt with by the world's major economies working together in the G7, the G8, the G20 and other institutions. Britain's focus must be multilateral and international, not merely regional. At least as far as the banking crisis at the heart of the current problems is concerned, London is not just another city within a member state of the European Union. It is a global financial capital in its own right, and on issues of financial regulation, the UK Government must protect the interests of London. Whether we like it or not, in the present circumstances, our private prosperity and the funding of our public services are heavily dependent on the prosperity of the financial markets based on the City of London, and will be for the foreseeable future. Of course, that means an enhanced system of financial regulation to replace the failed regime of 1997, but it must be a system that is designed for the challenges facing London and co-ordinated directly with the Governments of other major financial centres around the world, not one that is intermediated by the EU, the primary purpose of which is, quite properly, the internal regulation of financial services in the European market and not necessarily the promotion of London as Europe's principal financial centre.

David Heathcoat-Amory: Has my hon. Friend detected any recognition in the Commission's papers of the regulatory cost to the real economy of the continuing flow and volume of job-destroying regulations? Is he aware that, specifically, the passenger emissions regulations recently agreed show, according to the Government's own cost-benefit analysis, that the cost outweighed the benefit, even after taking into account the supposed environmental benefit? Will he commit himself to examining that burden of cost, which undermines our competitiveness, and that of Europe, in the middle of a global recession?

Philip Hammond: I am not sure that the consensus of economic opinion sees the rapid collapse in inflation as an entirely a good thing. We are heading rapidly into deflationary territory, with growth in the retail prices index below 1 per cent. and falling at the fastest rate since the early 1980s. The Minister is far too smart and well informed to think that that is entirely good news. It is good news if the increase in prices is moderating substantially, but having lower prices in the shops does not help people who do not have a job or any earnings with which to purchase things. I can see that the Minister is a "glass half full" man who sees joyous news in this morning's inflation figures, but I am afraid that many people will see in them yet another measure of the calamitous collapse of demand in the economy and warnings of the problems to come, particularly in employment.
	There is a legitimate debate to be had about the role of fiscal policy in rescuing economies from recession and about the behaviour of households and the extent to which it is Ricardian, as the economists would describe it. A lively debate is taking place in the academic literature, with analysis of the experience of previous recessions. That debate has been contributed to by, among others, Professor Christina Romer, the chair of Barack Obama's council of economic advisers, who identified monetary developments as being largely responsible for the recovery in the US after the great depression and fiscal developments as contributing "almost nothing" before 1942, when the gearing up of wartime production provided a demand stimulus. Professor John Taylor of Stanford university, another former member of the council of economic advisers, concluded that effective fiscal policy should be limited to allowing the "automatic stabilisers" to operate freely and appropriately.
	It is not my purpose today to rehearse the academic debate. It is sufficient to note that a debate is taking place. Each Government around the world and in the EU will draw their own conclusions, based on their history and experience, about the desirability and effectiveness of using a fiscal stimulus, and we have seen that debate taking place particularly emotively in Germany. However, the Commission's papers, despite the Government's attempts to spin them in a different way, do not support the fiscal action that the Government have taken, as the Prime Minister claimed that they do. In December, he said that
	"the debate about the use of fiscal policy to stimulate our economy and to give direct support for families and businesses in Europe is resolved. Europe favours substantial fiscal stimulus alongside cuts in interest rates...This European set of announcements is the answer to those who...believe that fiscal policy has no role to play."—[ Official Report, 15 December 2008; Vol. 485, c. 813.]
	The European Commission's papers, however, make it very clear that fiscal action must be constrained by the growth and stability pact. Page 7 of the recovery plan states that
	"the budgetary stimulus should take account of the starting position of each Member State. It is clear that not all Member States are in the same position. Those that took advantage of the good times to achieve more sustainable public finance positions and improve their competitiveness have more room for manoeuvre now. For those Member States, in particular outside the Euro area, which are facing significant external and internal imbalances, budgetary policy should essentially aim at correcting such imbalances."
	There could not be a more explicit reference to the UK without specifically naming it.
	The truth is that Britain simply does not have the fiscal room for a stimulus package. We entered the credit crunch with the biggest budget deficit of any major economy. In March 2008, the Government had to concede that, for the seventh year running, the outlook for the public finances was weaker than had previously been forecast. According to the Institute for Fiscal Studies, 16 of 21 comparable industrial nations have reduced their debts and 19 have reduced their structural budget deficits by more than the UK since this Government have been in office. The World Economic Forum has stated that Britain's
	"greatest weakness"—
	stems from our—
	"growing public sector deficit".
	The stark fact is that, as this Government increase our debt to 57 per cent. of gross domestic product and to more than £1 trillion in just three years' time, every child born in Britain today is born with £17,000 of debt around its neck.
	The Commission also notes the need for credible medium-term budgetary frameworks, and the Government's response relies on the claim that fiscal policy has been set on the basis of delivering a balanced, cyclically adjusted current budget and a declining debt-to-GDP ratio once the recession is over. That was the claim of the Minister's colleagues, but I put it to him that he and his colleagues have no credibility when they make such statements. Their Government ran a structural budget deficit through seven years of continuous economic growth, and in each of those years, they predicted a return to balance in two or three years' time. Every year, however, that prediction was postponed by another year. The return to balance was the "jam tomorrow" that never came.
	The Commission's paper argues, as the Minister has said, that the growth and stability pact should be implemented with "flexibility" during the recession, and that corrective action would be required during the recovery. The Government have latched on to that, saying that they agree with the Commission that excessive deficits need to be corrected over time frames consistent with the recovery of the economy. The Minister quoted that statement, but the EU is referring to excessive deficits that arise as a result of tackling the economic crisis, not to excessive deficits that are already in breach of the growth and stability pact limit and that were being run before we even went into recession. Those deficits were earning rebukes from the European Union before the economy had even turned down. That was the situation that the United Kingdom found itself in. The Commission's prescription for those with structural deficits before the recession is very clear, and I have already spelled it out. It is that fiscal policy should essentially aim at correcting such imbalances.
	The Government are wrong to interpret these documents as any kind of green light for their unaffordable fiscal actions, which only add to the mountain of debt, hamper the recovery and burden future generations. On the contrary, the warnings to the UK in the Commission's paper could not be clearer, and the UK Government's response is disingenuous in the extreme in trying to interpret it otherwise.
	On the global response to the financial crisis, the Commission is empire building and the UK Government are right to rebuff it, but need to do so more forcefully. On Lisbon and supply-side reforms, the Commission is merely cataloguing the failure to deliver on the agenda agreed many years ago to make Europe the most competitive knowledge-based economy by 2010—an objective that now looks rather a long way from being achieved. The UK Government response merely endorses that agenda once again, rather than identify the reasons why it has not been delivered.
	On the financial markets architecture at EU level, the Government need to dig in and ensure that they will determine the regulatory regime governing Britain's biggest industry and that they negotiate globally on cross-border supervision and information-sharing arrangements that can be done effectively only at a global not a regional level. I do not necessarily regard it is my purpose to endorse what the Government do in this area, but I have to say that, for the good of my country and the prosperity of my constituents, I would rather have even this Government negotiating on those matters than the European Commission whose interests are diverse, diffuse and not necessarily focused on the best interests of the UK.
	Finally, on the fiscal stimulus, countries that are in a position prudently to increase their deficits must make their own decisions about the case for active demand management and the risks attached to it, but the UK clearly does not have the scope to deliver such a stimulus without damaging medium-term fiscal stability. The Commission, to its credit, makes that very clear, and the Government have failed to respond to the warning, simply pretending that the Commission document says something different and claiming that the EU has provided cover for the Government's politically motivated actions when it patently has not.
	We cannot endorse this flawed approach, so I urge my right hon. and hon. Friends to vote against the motion when it is put to the vote.

Michael Connarty: I am not giving way so early in my speech.
	The UK acting alone would, quite frankly, not be able to deal with the blows coming from the banking credit implosion—that is what it is throughout the world. I do not use pejorative terms like "Johnny Foreigner"; I understand the banking system and its international nature. Decisions were taken by some of our so-called great banks—those are the ones that made the greatest errors—so we have the Royal Bank of Scotland with £2 trillion of debt, based on very dubious assets. I studied economics and know what my economics professor would have thought. The Conservative Government took away the rules and we then further loosened them, and he would have been horrified at the leverage on such worthless assets as mortgage debt bundles. This needs to be dealt with on a big scale, and I believe the EU is the best mechanism for doing that.
	I thoroughly endorse the Government's approach. I would have preferred it if they had not only "noted" the documents, but actually agreed with them as well. I often wonder whether people ever take the trouble to read the documents that our European Scrutiny Committee endeavours to read from cover to cover. I shall refer to some that have not been referred to in any detail today. They may not have been read yet, as they were put before our Committee only at its most recent meeting, on 12 January.
	I welcome the increasing flexibility that—notwithstanding the picture painted by Opposition Front Benchers—is a feature of communications from the European Union on how the crisis should be dealt with. The early papers that were before the Committee in December on the framework document and the document on recovery from the financial crisis were a little rigid and cautious. The very good officers of the House who advised the Committee, for example, said:
	"At first blush, some of this"—
	that is, the proposal on reinforcing competitiveness—
	"seems to include acceleration or resurrection of pre-existing Commission ambitions, for example revision of the European Globalisation Adjustment Fund rules or stepping up investment in Trans-European Networks."
	However, the situation has moved on quite a bit since then. I think that Opposition Front Benchers should note the frameworks and endorse them, and also note later documents showing both the Government's willingness to be flexible and—again, contrary to the picture painted by them—to resist policies of which they were not yet convinced. I shall give examples of that later.

Michael Connarty: One of our problems is that we became fully involved in a way that I would roundly criticise, without exercising proper caution. There are questions to be asked about the regulatory framework, but we are not here to debate that. I have said the same in statements that I have made both publicly and in the House. The problem began with an attitude towards the banking system that originated with the Conservatives and, sadly, continued under our Government.
	I am willing to speak about the Financial Services Authority and the failings in regard to policies on regulatory reform at any time, but that is not the context in which this debate is taking place. We are experiencing a crisis, and we have seen the collapse of the banking system. It has been an international rather than a national development, affecting economies at different levels, but the socialist-leaning economies of the Scandinavian countries seem to be more immune than others.

Michael Connarty: It is not collapsing because of attacks on our currency. It is falling because of interest rate and borrowing policies. It is falling because of a natural market pattern, not because of an attack by one economy on another, which is what used to happen. Economies would deliberately do down other currencies, but that is not what is happening now. I agree that being outside the euro at the moment is an advantage for our competitiveness, and I am pleased that we are outside it. I would have urged us to go in earlier, but I am willing to recant on that, because our flexibility at this time and in this situation is wonderful.
	The European Union will have to show great flexibility with the Irish situation, or Ireland may not be able to sustain its membership of the euro. European document 14306/08, which we also considered on 24 November, changed the interpretation of state aid rules in exceptional circumstances of financial crisis. It is important to realise that state aid policies would have choked off any attempt to deal with the problem of the real economy or support for the financial sector.
	Another two documents were tagged, and the Committee considered them only last week, on 12 January. The first gave the context for state rules in guidance on the recapitalisation of banks. It is important to consider that, and I shall quote some of the stated aims of that policy, because there is flexibility in that context. Its purpose is
	"contributing to the restoration of financial stability; helping ensure lending to the real economy; and avoiding systemic effects from insolvency of a financial institution."
	That is underpinned by good, sound rules. It continues:
	"Member states' own banks should not obtain an undue competitive advantage over banks in other Member States."
	The policy is about flexibility. Not everyone is happy and everything is not hunky-dory, or whatever the hon. Member for Wellingborough (Mr. Bone) said, but there are signs of willingness to try to create a co-operative approach throughout the EU. We would not have had that without the EU, and I commend the Conservative Government who took us into the European Union. I voted yes then, and I would vote yes again.
	The document also states that
	"state recapitalisation should not distort the domestic market, banks that seek additional capital in the market should not be put in a significantly less competitive position due to state recapitalisations."
	That guidance and those rules, which the EU has agreed, are important. Whether the Commission, Britain, the French or the Germans came up with them does not bother me, nor does it bother my constituents who write to me asking why they cannot obtain credit, and why their bank is taking away the credit that they require for their cash flow to enable them to buy the goods required to manufacture the products to sell to their customers. I have written to the chief executives of the banks of those who have written to me because the banks have to realise that they must show co-operation and flexibility, and the ability exists for them to do that. I hope that we will commend the Government for their endeavours.
	I repeat that Opposition Front Benchers appear to want to ignore the wolf at the door to talk about the bogey man in the cupboard. It is time they focused on the real problem. The Commission is not some sort of animal that is out of control. We have control of the Council and I hope that, after the Lisbon treaty, we will have control in the Parliament of dual mandate, which is important and will democratise the process. If we are not willing to engage in that and simply want to call names across the water, we become increasingly ridiculous, but—thank goodness—the Government are not doing that, as the motion shows.
	The final document that is tagged to the debate is 17606/1/08, which we considered last week, to amend the 2007-13 financial framework. The intention was to change it in such a way that we moved, for example, €5 billion to trans-European energy connections from the defence of natural resources, and thus try to put the money into the real economy. The idea is worth considering. The Government are not currently convinced about it, and the Committee has not cleared the document because we believe that further dialogue is needed with the Government. However, that shows that the Government are not simply jumping in lock, stock and barrel and accepting every proposal that comes out of the Commission. They want to examine it in detail and see how it will affect our economy and our companies. The right framework and the right plan are being pursued, and they should be endorsed.

Jeremy Browne: There are occasions, albeit less frequent than in the past, when the Chamber feels like the centre of the political world. Today may not be one of those occasions, but we are holding an important debate, and I regret that more time has not been allocated for our discussions.
	Following the comments of the hon. Member for Linlithgow and East Falkirk (Michael Connarty), I emphasise that the Liberal Democrats believe that the European Union has a role in addressing the financial crisis. The contamination of the banking sector and the deficits faced by Governments in advanced economies are international phenomena, and the Government are right to work in the G20 with the Administration that will take over 21 minutes from now in the United States.
	Of course, four of the seven members of the G7 are EU member states. Therefore, we have within the parameters of the European Union clear scope to try to work to our mutual benefit by addressing some of these common problems. The EU is, of course, also our biggest trading partner, and the United Kingdom is part of the single market and is, therefore, to an extent influenced by decisions taken within the overall European Union that impact on businesses and individuals in this country. The EU also has a greater critical mass than the UK. That is a particularly pertinent issue with regard to the banking sector.
	The Conservative spokesman and others have raised the primacy of London within Europe in banking and the financial sector, and I greatly welcome that, but London is now such an international centre, and the scale of the investment—and, in many cases, the debt—held by institutions based in the UK, and often in London, is so vast, that in some cases it threatens to dwarf the ability of the UK Government to deal with, and, if need be, save such institutions. RBS, for example, is now 70 per cent. owned by the UK Government, and if what we read is true, its liabilities are about double the size of the total British economy. If we took on its liabilities and they were put on the overall public balance sheet, we would instantly go from being a country with growing levels of public debt—but levels nevertheless comparable to those of many other leading economies—to a country with much higher levels of public debt. The accountancy might not be done in that way, but the scale of such financial institutions in comparison with the scale of the British state and economy has changed markedly in the last decade, and that has a bearing on how governmental institutions have to regard the current situation. The scale is now completely different from Northern Rock and Bradford & Bingley; now, a few months on, the discussions we were having on them in this Chamber seem quite innocent. When we discuss RBS and Barclays, we are talking about big international institutions.
	What conclusions can we draw from reading the documents put before us and from the debate we are having here in the UK? The first is that the bankers themselves have behaved without honour or shame, and many people would like to see greater contrition from them. Secondly, the UK banking sector, and the regulation of it, has been a failure, and the UK Government need to learn the lessons of that failure of regulation. However, we also need to look at the scope for wider European union and for global regulation. There is a balance to be struck, of course, but when institutions operate around the world and do not recognise national borders, there needs to be some regulatory recognition of that reality.
	The Government need to know the liabilities that we—the taxpayers—are covering. I echo the sentiments that have been expressed, in this debate and elsewhere, that this is a difficult moment for our Prime Minister. We have got used to his lecturing other EU member states on how he brought an end to boom and bust and how they should follow our example in the UK, but we now find ourselves in a rather more humble position, because although the EU may not be driving growth on a global scale, but it is certainly not looking sickly in comparison with the UK.
	The EU's framework for action deals with the real economy, and that is the correct focus. There is a need for a fiscal stimulus across the EU to encourage consumer demand, and I do not share the Conservative party view that we should be seeking to choke back consumer demand at this point. Nor do I share—this follows on from the observations made by the previous speaker—the Conservative party's paranoia with regard to the European Union. The shadow Cabinet is split on the Lisbon treaty, on membership of the euro and even on whether the British Government should be temporarily cutting the rate of VAT.
	The Conservatives have not given us a clear answer. They may not like the Government's policy on interest rates, but what do they think interest rates ought to be? The Conservative party is keen on telling savers that interest rates have been cut too low, but I understand that, having rescinded its initial stance of not having any views on interest rates, it now completely supports having interest rates of 1.5 per cent.—a tenth of what they were under the previous Conservative Government. What does the Conservative party wish the deficit to be? It says that the deficit is far too high, but the party could give us a percentage indication. The previous Conservative Government ran a public annual deficit of 8 per cent. in the early 1990s. Is that roughly what the Conservative party has in mind at the moment, or is that figure too high or too low?
	I can understand why the right hon. and learned Member for Rushcliffe (Mr. Clarke) has been brought back to mentor the Conservative shadow Chancellor. All I can say is that if the right hon. and learned Gentleman is offering a similar service to the Liberal Democrat shadow Chancellor, the answer will be, "Thanks, but no thanks," because he does not need his hand holding in the same way. Does the hon. Member for Runnymede and Weybridge (Mr. Hammond) wish to intervene?

Jeremy Browne: I shall be in the Chamber tomorrow, because I diligently attend debates in this House. The Conservative party is very much giving the impression of being a group of politicians seeking to make this up as they go along—perhaps we will have some coherence from them tomorrow. Their instinctive hostility towards the European Union, as put forward by the hon. Member for Stone (Mr. Cash), the right hon. Member for Wells (Mr. Heathcoat-Amory) and others this afternoon, is not advantageous to the UK's position.
	The EU's economic recovery plan offers some useful pointers to the way forward. One of those is the fiscal stimulus, which has been mentioned by the Minister and others. If it is co-ordinated, it will have added effect. The economies of Europe are interdependent to some degree, so there is scope for co-ordinating not only a fiscal stimulus but interest rate policy where that is applicable and likely to be effective. The immediate aspiration is to boost demand in a way that is advantageous to businesses across Europe. It is right to support viable businesses, including through measures such as aiming to speed up the payment of invoices.
	I am very cautious about going down the path of propping up businesses that are simply not able to manufacture a product or supply a service for which there is sufficient consumer demand to make those businesses viable. The United States, for example, needs to be extremely cautious about going down this path to any great degree. There are other businesses that are essentially viable but have short-term cash flow problems, and it is valid to give them the short-term assistance that they need to get over those pressures.

Jeremy Browne: This is a widening of the debate, but the three big car-making companies based in Michigan in the USA have problems that go beyond this immediate economic cycle. Asian car manufacturers have located themselves in states of the USA, mainly in the south. They are producing cars within the domestic American market, and so not necessarily with cheaper labour costs, although they have probably negotiated better terms with their employees. They are producing cars at a cheaper price that more Americans wish to buy. I am afraid that the big three American car manufacturers have become bloated and complacent.
	If we are to learn something from the 1970s, it should be that it is not in the longer-term interests of the economy for the state to continue to support businesses that are not competitive. I am making the distinction between that and the provision of short-term cash flow support for companies that are essentially viable but find themselves in short-term difficulties. It may sometimes be difficult to distinguish between the two, but it is not that hard in the case of the American car companies. They have problems that, in retrospect, may have been evident for a number of years.
	The third matter identified in the economic recovery plan is infrastructure development, with crucial investment to be brought forward. That is important in this country, where for example the house building sector has dried up, but also right across the European Union.
	The fourth matter is innovation, and what many of us call a "green new deal". That is a matter on which the EU has provided genuine leadership in the global debate, and the high level of environmental consciousness in the EU and among its citizens means that there is scope for it to continue to lead on energy efficiency and greener transport, for instance by producing cars with lower carbon dioxide emissions. The American car-making market has not been sufficiently mindful of that, which is yet another example of the big manufacturers there being behind the curve and not anticipating changes to consumer demand. The EU can and should take the lead on such matters.
	Yesterday, the Commission announced that only Iceland and the Baltic states will suffer a worse recession than the UK. Our economy is anticipated to shrink by 2.8 per cent., unemployment is set to rise towards 3 million in 2009, and the banks are awash with hidden toxic debts that the taxpayer is now having to fund. The Government's own borrowing estimates are constantly being revised upwards, and I ask the Minister whether he or the Chancellor really believe that the UK economy will start to grow again this July. Does anyone in the House or in the country believe that any longer?
	We must offer some hope and some optimism that Britain and Europe as a whole will emerge from this crisis, that we will learn the lessons about greed in the banks, which the hon. Member for Linlithgow and East Falkirk mentioned, and about inadequate regulation, and that we can build a better, greener, fairer and more decent society. I believe that that will be the case once we have got through the very difficult months and possibly years ahead.

Kelvin Hopkins: There is not much time left, so I shall try to be brief. I welcome this opportunity to debate the economic crisis and an EU response to it. We are seeing a series of national responses with some more words about co-ordination and solidarity, with the EU limping along behind and coming up with its own strategy. In reality, it is the national strategies that are being undertaken.
	It is right that other countries are starting to imitate what Britain has done. We have yet to see whether it will be enough or whether it will work, but at least we have taken some strong action. Germany has now followed suit, although it was initially critical. It is beyond the EU's ability to cope with the crisis, because its whole economic philosophy is inherently deflationist and the opposite of what is required, which is reflation.
	The documents that we are considering show some interesting contrasts. The EU is still trying feebly to promote its neo-liberal clap-trap—the very policies on liberalisation, supply side monetary constraints and so on that have led the world to crisis. The UK Government's response is more realistic and pragmatic and differs significantly in tone from the documents. I am pleased about that. I agreed entirely with the Conservative spokesman when he said that the British Government were a better judge than the European Union of what is best for the British economy.
	Even the EU documents have changed their tone between October and November. By November, the supply side words were still there—the usual nonsense—but the recovery plan had started to talk about swiftly stimulating demand, words that possibly have not featured in EU documents ever before. They perhaps recall the words of Keynes, who saw his way to creating an economic system that worked after the second world war.
	Co-ordinated reflation was one of the slogans of those who, like me, long supported the alternative economic strategy, as it was called. Co-ordinated reflation is what we need now, but we will not get it if countries cannot indulge to an extent in some defence of their economies. If they are simply going to reflate and suck in input, they will not benefit their economies. Some degree of protectionism, I think, will happen. It is already happening in America.
	The word "protectionism" has been used as a hostile epithet for the common economic policies that I have supported in the past, but if one looks back to the 1930s, one sees that the depression was caused by deflationist policies, particularly in France and Germany. The hon. Member for Louth and Horncastle (Sir Peter Tapsell) has mentioned that in recent debates, and he is absolutely spot on. When countries reflated behind tariff barriers, it helped them to recover. That was particularly true of Britain. Another way of protecting one's economy, of course, is to depreciate one's currency. We came off the gold standard in 1931, and that helped us to stimulate.
	There is also the question of fiscal stimulus. It might be that in the 1930s America did not benefit quite so much from fiscal stimulation, but Britain certainly did. Let us consider Nazi Germany—I would not imitate everything that it did, but it built like there was no tomorrow. It built a massive arms industry and motorways and put all its people back to work. That was not done by monetary measures but by fiscal stimuli and public spending. The economics, if not the politics, were certainly right. I would have built hospitals rather than arms, but it did the right thing.
	In the EU, a number of countries are going to suffer badly because they are in the eurozone. Ireland is a particular example. In contrast to what the Liberal Democrat spokesman said, a report in  The Independent today suggests that Ireland will suffer most, with a 5 per cent. contraction, followed by Germany, interestingly. Germany has always been lauded as the great success in the past, but it is also a mirror image of us. We are a country with a balance of trade deficit, but the Germans have had a balance of trade surplus. That surplus is in serious danger because of declining demand in the international market. The Germans will have a serious problem. Keynes was absolutely right to say that big surpluses and big deficits were wrong and that countries should be able to appreciate or depreciate their currencies to deal with them. If we want stability in the world economy, we have to allow countries to adjust their economies. Indeed, we must encourage them to adjust their economies to ensure that they do not get strongly out of line, as Germany is in one direction and we are in the other.
	Spain has got problems, and how is Italy going to recover without withdrawing from the euro and devaluing? I think that Italy has to think seriously about its membership of the eurozone. There have been civil disturbances already in Greece, but I think that Germany has a very serious problem. I hope that the Germans are sufficiently intelligent to deal with it; I worry about disturbances in any country, but disturbances in Germany would be more worrying than most.
	This has been a very brief debate and I am running out of time, but I suggest that we must think seriously about reconstructing the Keynesian world that we had between 1945 and 1970. It was regulated and stable, and it grew rapidly, with living standards rising faster than at any other time in our history. We must seriously consider reconstructing the world economy on that basis.

Peter Bone: It is useful to hear that from the Economic Secretary, but I have here a document signed by him says that in 2009-10, our budget in the EU will increase by €670 million, which seems somewhat at odds with what he just said.

David Gauke: I shall bear your strictures in mind, Mr. Deputy Speaker. I think that a number of Members will wish to speak—those, that is, who have not been distracted by the inauguration speech of President Obama. The challenge for us, of course, is to find the words and phrases that shall resonate throughout the world and through future generations. Are we capable of doing so? I suspect that the answer is "No we can't", but none the less we have an important issue to debate, and I am grateful to the European Scrutiny Committee for enabling us to do so on the Floor of the House.
	This is not the first occasion on which I have represented my party in these debates. It is, I think generally, with a degree of weariness that we address this issue—that probably applies to Labour Members as well—because yet again we are faced with the European Court of Auditors' failure to sign off the European Union's expenditure. Once again the Minister says that that is unacceptable, and once again the Opposition say that it is unacceptable. The Minister has outlined some of the ways in which the Government seek to address it, but, if we are honest, all of us expect to be here—or upstairs in Committee—in the same position next year, with the European Court of Auditors having failed to sign off the 2008 accounts.
	There is that sense of weariness, but there is also a sense of frustration. I think that that applies regardless of one's views on the European Union. It is hugely frustrating that, at a time when we are all tightening our belts—households, businesses and indeed Governments, although some of us perceive greater urgency than others in that regard—huge amounts of European Union funds are still being wasted by the EU and by member states. The fact that that money is not being spent wisely is all the more significant in the light of the point made by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) about the increase in our contribution.
	I have no intention of becoming involved in the debate about the impact of depreciation generally, and I am grateful to the Minister for his helpful explanation to the House, but the fact remains that—as has already been pointed out—we have seen an element of our rebate negotiated away, and it would be helpful if the Minister could update the House on that. When we discussed the value of the rebate that had been negotiated away, this time last year and in the debate on the legislation that formalised the arrangement, the cost was estimated at £7.4 billion over the next accounting period of six years. I hope that when he winds up the debate the Minister will have an opportunity to give us some idea of the updated cost of the rebate surrender, because I suspect that there is such a cost, and the fall in the pound is expensive to United Kingdom taxpayers in that context.
	The first question that we must ask ourselves in relation to the European Court of Auditors is "Have things got better?" Every year some improvement is expected, but it appears that the answer is "No". Since 2006-07 the value of irregularities has increased from €804 million to €1,048 million, and over the same period the value of fraud has increased from €189 million to €209 million. I take the point that, for the vast majority of the money involved, the problem is not fraud; it is irregularity, but it is not always clear when one becomes the other. Some reporting from member states simply states that something is an irregularity, and there is insufficient explanation of what constitutes fraud, so it is not always clear.
	Under the individual budget headings, the number of irregularities in the structural and cohesion funds has increased by 19.2 per cent. to 3,832, and the value of those irregularities has increased by 17.7 per cent. to €828 million. On agriculture, the Minister, to be fair, highlighted that last year's Court of Auditors' report anticipated that the irregularities would be addressed. Indeed, the then Financial Secretary, the right hon. Member for Liverpool, Wavertree (Jane Kennedy), spoke about the matter last year and highlighted it as one about which we could be optimistic. But serious irregularities are found in one fifth of all payments sampled in that very sector, which was supposed to be improving.
	Some people defend the Commission by saying that the problem is all the fault of member states. I, for one, acknowledge that there is an important role for those states, and that there are failures at that level, but the Commission is ultimately responsible for the legality and regularity of transactions underlying European Community accounts; it designs the paperwork that is too complex to understand; and it fails to check that the paperwork is properly completed. The European Court of Auditors is clear about that. It says that the Commission is unable to demonstrate comprehensively for 2007 that supervisory and control systems are sufficiently effective in mitigating the risk of error in certain policy areas. The Commission has a role, but is failing to perform it.
	A spokesman for the Commission has said that it is not all its fault, and that blaming it is like blaming a referee for all the fouls committed in a football match. I am a football fan and that may be a fair analogy, but when players in a football match are kicking lumps out of each other and the referee fails to enforce the rules adequately, the referee is responsible and should not be allowed to continue to referee matches. The Commission is failing in its responsibilities.
	When the UK held the presidency, it said that it would focus on fraud and irregularities, but years later there has been little progress. When the noble Lord Kinnock was the Commissioner responsible for such matters, he said that he would tackle the problem, but his most notable action was to sack a whistleblower who identified fraud and irregularity. A key objective of the Barroso Commission has been to address the matter, but it has failed.
	The Court of Auditors, in the context of the action plan developed by the Commission, which it tried to implement and to which it points to show that progress is being made, said that
	"the Commission is not able to demonstrate that its actions to improve supervisory and control systems have been effective in mitigating the risk of error in large parts of the budget. The court does not yet find evidence to support the impact of the action plan claimed by the Commission."
	Indeed, one MEP estimated that it will take 20 years to obtain a statement of assurance. When does the Minister think such a statement will be delivered on European Union expenditure? How long must we wait?
	I said that there is a role for member states. How does the Economic Secretary think the Government are performing with regard to irregularities in EU spending? The only cohesion spending programme sampled by the Court of Auditors showed that the UK has only a partially effective financial control system. This time last year, we debated in some detail the finding that European regional development funds in the north-west of England had not been spent appropriately, and the Commission was seeking to claw back some £20 million. The BBC and  The Times reported in November last year that the Commission was seeking to claw back in total—this does not apply to just one year's expenditure—some £190 million. Can the Government confirm that that is the case? What is their estimate of the funds that may be clawed back by the Commission and how satisfied are they generally that they can spend European Union money without irregularity or fraud?
	Once again, there have been significant failures by member states and the Commission, and there is a depressing lack of progress. When will something be done? The widely held view is that there is something endemic, and perhaps institutional, about the problem. Member states raise taxes, and make contributions to the European Union which are then divided among member states to be spent, but there is an essential lack of ownership of the expenditure from the European Union. No one really believes that it is theirs, and the same level of care and attention that one hopes is given to member states' own money is not applied to anything like the same extent to money from the EU. Consequently, there is failure after failure, irregularity after irregularity, and levels of fraud that shame member states and the Commission.

Nicholas Winterton: I have a simple question. Why is it taking so long to have accounts cleared because they would have to be cleared, certified and audited by professional accountants in this country if they were for a private company? Does the hon. Gentleman not accept that hundreds of millions of euros are still going walkabout every year? Is this an acceptable state of affairs?

Michael Connarty: I will leave the last part of the hon. Gentleman's assessment to the auditors and the fraud office, but all I can plead in my own defence is that I have been Chair of the ESC for only two years and things have improved vastly in that time. I do not claim any correlation between those two facts, however. One of the great difficulties in defending the EU is that people often look at it with a deliberate eye to seeing where they can transact dubious movements of money. There have been scandalous situations in some countries, where individuals have somehow trousered lots of money—£36 million for a single individual in one case—and Bulgaria has clearly not brought itself up to a satisfactory level of financial control and sufficiently reduced corruption to justify its spending the money to which I have referred.
	I must add that our Committee can put its hands up and say that we said Romania and Bulgaria should not have been allowed into the EU in 2007; nor should we have made them the offer that if they did not come up to scratch in 2007 and even if they did nothing, they would get in in 2008. As someone said to me privately, that meant that the politicians thought that they did not have to listen to Europe any more, and that if they just waited and did not change anything, their countries would get in. There have been more than 100 contract killings in Bulgaria since it joined the EU; that is a frightening statistic. The excuse we got when we met its Foreign Secretary was, "Well, they hire Russians, and they just go back to Russia after the killings, so we can't find them." Things are going on in the world that we would all like to change, but I shall now return to the budget.
	Mr. Bostock states in paragraph 11 of his letter:
	"In the other areas of expenditure—agriculture and natural resources; cohesion (the Structural Funds and Cohesion Fund); research, energy and transport; external aid, development and enlargement; and education and citizenship—however, the Court concludes that payments are affected by material levels of error".
	The letter continues with the observation
	"that supervisory...systems are only partially effective in ensuring that payments are properly made."
	Therefore, there are major identified faults.
	Paragraph 12 states:
	"As for 2007, the Structural and Cohesion Funds are the area of spending most affected by error...'The Court estimates that at least 11 per cent. of the total amount reimbursed should not have been reimbursed'."
	Given that that is known, we think that the next thing to do would be to find out who the people involved were, get the money back and prevent that from happening in the future.
	The letter continues:
	"Rural development accounts for a disproportionately large part of the overall error rate estimated in agriculture and natural resources."
	It is not agriculture and natural resources, but so-called rural development that is the main error area, therefore.
	Many other things are worth commenting on, but I shall draw the House's attention to a point that David Bostock drew to the attention of the Committee. He wrote:
	"The latter part of Chapter 1 (from 1.42 onwards) discusses the problems of ensuring that EU spending takes place properly. It leads to the conclusion (in 1.52 to 1.54)"—
	of the report before us today, which I find an incredible conclusion—
	"that there are political choices to be made about the control of spending and what risk of mis-spending is tolerable."
	No level of mis-spending is tolerable for any political reason. That should be the rule by which the anti-fraud office and the EU run.
	The letter states:
	"Chapter 2 reports some improvements in the Commission's supervisory and control systems, notably a greater realism than in previous years in the reports by Commission Directors General about the legality and regularity of the expenditure for which they are responsible."
	That would appear to imply that the directors general previously had greater laxity in terms of what they considered to be realistically acceptable in expenditure.
	The letter continues that
	"the Court's conclusion is...that the Commission is not able to demonstrate that its actions to improve supervisory and control systems have been effective in mitigating the risk of error in large areas of the budget."
	It is an honest and clear appraisal, and it is in the documents contained with the report before us today. It would merit everyone studying it in detail.
	I wish to discuss what is said about the UK in the annual report, because we are never completely free of blame. For example, we regularly get reports that more cases have been brought against the UK over the illegal taking of fish in the EU than against most other countries —[Interruption.] Not in the past couple of years, but certainly in the past.
	Paragraph 17 of David Bostock's letter states:
	"There are references to the United Kingdom in chapters 5 (the CAP) and 6 (cohesion) of the annual report."
	Paragraph 18 states:
	"In chapter 5 criticisms are made of the establishment of the management of the CAP Single Payment Scheme. See in particular paragraphs 5.22, 5.26, 5.30 and Annex 5.1.2."
	Paragraph 19 states:
	"In annex 6.1 to chapter 6 the Court reports on its assessment of supervisory and control systems in 16 Structural funds programmes."
	He was talking about programmes involving the UK, and he continued:
	"One of these is jointly managed by the UK and Ireland."
	No country, not even this country, is free from questions about the way in which people carry out their transactions. That does not mean that they are fraudulent; it just means that the accounting systems and the way people are reading the spending rules for European Union funds call the transactions into question. It does not mean that when clarified, they will end up being seen as fraudulent or improper reimbursements.
	I wish to finish with an anecdote about one of my local farmers who was having problems with his sheep premium returns. When I went to help him out, he pulled out a bundle of things that were the equivalent of backs of fag packets—a number of bits of paper and backs of purchase invoices—where he had written out his various sheep numbers and so on. I could not make head nor tail of them. Of course, our people then turned up from the Ministry of Agriculture, Fisheries and Food and said that they could not make head nor tail of them. He could remember but could not prove what he had done, so he was having difficulty getting his payments. We must have systems, particularly in the A8 countries, that are disciplined, transparent and easy to understand, so that people are not accused of fraud when they are not fraudulent and so that we find fraud where it exists. In the meantime, I hope that the criticisms made in this debate will be passed on to the Government and to the European Union, and I hope that we will see further improvements in the future.

Jeremy Browne: My party takes an enlightened view of the European Union. I had an opportunity during the previous debate to touch on some of these themes, so I shall not rehearse them again at length. Liberal Democrats regard the EU as having a useful role to play in bringing nation states together to co-ordinate our response to the current economic crisis effectively. We emphatically think that the EU has a role to play in trying to mitigate the effects of climate change and prevent it from being as bad as it otherwise would be. Most people would accept that the EU and public opinion across Europe are further ahead in the debate than anywhere else in the world—certainly further ahead than in north America and Asia. The European Union, with Britain at the forefront, has a role to play in taking that agenda even further forward.
	The EU also has a key role to play in international diplomacy; we share the values of democracy, free speech and free markets, although free market economics have been challenged in the past few months. Probably the greatest foreign policy development and achievement in my adult lifetime has been the expansion of the European Union and the embracing by eastern European states that previously lived under oppression of freedom and those broad liberal values that we often take for granted in this country.
	I regret the paranoia that the Conservative party typically displays towards the European Union—the sense that everything that emerges from Europe must inherently be bad or a cause for suspicion. That paranoia persuaded the Conservative party to vote unnecessarily against the Government in the previous Division. However, I and my party recognise that just as politics in the United Kingdom is broken to some extent, politics and the financial and budgetary process in the European Union need to be dramatically overhauled. My party rightly recognises and welcomes some of the limited progress that has been made, but our bottom line is that that progress is not good enough. I echo the sentiments expressed in this debate by the Conservative Front-Bench spokesman about the terrible, wearying cycle of these debates; year after year we hear that the European Union has, yet again, not met the standards that we are entitled to expect it to meet on behalf of our constituents, who pay their taxes and contribute to the UK's financial contribution to the EU budget.

Jeremy Browne: I regret being led astray by the right hon. Member for Wells (Mr. Heathcoat-Amory). I fear that nothing would ever be quite Eurosceptic enough for his taste, regardless of what I or his own Front-Bench team said.
	This House has a duty to safeguard and champion the interests of taxpayers in the United Kingdom, who contribute to the overall budget of the European Union. Much of the money that we are discussing is spent in the individual EU member states. I take on board the points made in the previous speech about the capacity of some of those member states to have auditing or overall political processes that meet the standards that we would expect in this country, and I agree that not all the money that is misspent necessarily involves fraud. Nevertheless, member states need notify the Commission only of irregularities of more than €10,000. I am told that the estimate of the total financial impact of irregularities has increased from €804 million to €1.048 billion a year. That figure is high enough to be a cause for concern, so I would like the Minister specifically to address that growth in the estimates of fraud and to tell us what representations the British Government are making to try to address the problem.
	In a debate that took place upstairs, I raised with the Minister of State, Department for Environment, Food and Rural Affairs, the right hon. Member for Liverpool, Wavertree (Jane Kennedy), who was then a Treasury Minister, the irregularities occurring in individual member states. I suggested that she might wish to identify, and thereby name and shame, the worst offenders so that we could make some progress—after all, that tactic is favoured by the Government in other areas of policy—by putting pressure on some of those member states to raise their game. She replied:
	"I am not sure that the most diplomatic thing would be to name the worst offenders, as the hon. Gentleman suggests."—[ Official Report, European Standing Committee, 28 January 2008; c. 9.]
	I fear that that is indicative of a less than muscular approach taken by Treasury Ministers. They could certainly express their discontent far more stridently within the EU than they currently appear to. Total UK budget contributions to the EU between 2007 and 2013 are to be £71 billion. Even spread over six years, that is a sizeable sum of public money by anyone's reckoning, and the onus is on the House and the Government to ensure that it is spent more efficiently and effectively.
	We are having an interesting three-way debate on the subject of Europe. The back-to-back nature of the hour and a half that we spent discussing the financial crisis and this debate has allowed the three party positions to emerge in a way that we do not often have the advantage of seeing so clearly. The Conservative party position is to favour an inert European Union. There is a sense of fear and loathing whenever the subject of Europe comes up. To give the Conservatives credit, however, they are alert to the financial irregularities and the need to make improvements. The Labour party position is to be positive and constructive with regard to the EU, but I regret to say that, on the downside, they are insufficiently alert—indeed, somewhat complacent—when it comes to the financial irregularities in the EU.
	Finally, there is the Liberal Democrat position, which is to be positive and constructive towards the EU and see that it has a role to play, as I said earlier, but also to be alert to the need to address financial irregularities. Only one party has both sides of that equation right, and that is my party, the Liberal Democrats.

Kelvin Hopkins: I apologise for not being able to be here for the first part of this debate, Madam Deputy Speaker, although I was here for the whole of the first debate.
	I have had the misfortune to debate this nonsense for the past 12 years, often in Standing Committees and sometimes in the Chamber. I sound almost like a broken gramophone record, but I wish to repeat some sensible thoughts in the hope that they will have some impact on my hon. Friend the Minister.
	There is a simple way to eliminate the fraud that is taking place, which is to change the whole European Union budget system into a new mode of operation. I add that although both Eurosceptics and Euro-enthusiasts keep talking about "Europe", the organisation is not Europe; it is the European Union. Europe is a continent that includes a lot of countries that are not in the EU, and the EU is a political construct imposed upon some of those countries. I therefore speak of the EU, not Europe. I love Europe and go there on my holidays every year, and various of its countries are absolutely wonderful.
	To overcome the problem, we must completely reform the budget. It currently redistributes revenue and income across the EU in a way that is sometimes rather arbitrary. Some countries pay more than they should and some receive more than they should. A way to overcome that would be to have a budget allocated by a simple fiscal transfer system that gave to those who were poor and took from those who were rich, so that everything was proportionate to the prosperity of the member state. That is if one wants to have such a budget at all—there may be a case for not having one, but that is another debate. If we are to have one, the way to make it fair and acceptable to everybody is to ensure that everybody receives according to their needs and gives according to their ability. There would then also be a transfer of power, from the EU bureaucrats who decide where the money will be allocated to the member states. Devolving more power back to member states would be sensible and agreeable. If fraud then occurred within those member states, that would be their problem. In Britain, we would no doubt spend the money sensibly and avoid the problem of having lots of apparently generous donations from the EU to local projects with the EU logo all over them when we are massive net contributors and only part of our money is being handed back. Britain suffers more from that than most countries. As a wealthy country we would be a net contributor under the system that I am proposing, but we would not be a net contributor with France, Denmark and even Ireland being net recipients. Like us, they would be net contributors.
	The cumulative figure for net contributions by Britain to the EU since we joined is £125 billion. The sums will rise substantially by 2013 because of the poor deal negotiated by Tony Blair during the British presidency. Of course, with the devaluation and depreciation of the currency, we pay substantially more each year. If contributions were a proportion of our national income rather than effectively geared to the euro, we would pay less.
	A system whereby there was a budget for pooled contributions from member states, where poor countries received and rich ones gave an amount proportionate to their living standards, would be a fair system that would eliminate the problem of fraud. We would not have the massive confusion and complexity of these budget reports. Decisions about where money was spent would not be made by bureaucrats in Brussels, but by democratically elected Governments in member states.

Daniel Kawczynski: Last summer, when Russian forces invaded Georgia, 11 European heads of state immediately visited Tbilisi to show solidarity. Regrettably, our Prime Minister did not have the time to visit. Will the Minister assure me that either she or the Prime Minister has plans to visit Georgia in the near future to show solidarity and show in the strongest possible way that we will not allow the Russians to intimidate that important country?

Charles Hendry: Will she add improving gas storage to her list? The only reason why the crisis has not been worse is that, at 80 per cent.-plus of capacity, many of our European counterparts have much more significant gas storage than we have. They have been able to withstand the reductions in Russian gas supplies. In this country, we have only 12 days of gas storage; we are critically short of it. Will the Minister talk to her colleagues at the Department of Energy and Climate Change to see what can be done to improve our situation and make sure that we have a buffer against such problems in future?

Mark Francois: I rise to respond to the Government's motion on behalf of Her Majesty's Opposition. I begin by thanking the Minister for her kind remarks about my recent promotion. I do not see my task as being an offsetting one, as she put it, but if, by the same token, her role is to offset the Business Secretary, Lord Mandelson, I think that she probably has a more challenging task than I do.
	The motion asks us, first, to take note of the European Commission documents before the House relating to EU-Russia relations, but also to support
	"the Government's policy on the future of the relationship in view of recent developments."
	I shall return to that key part of the motion later in my remarks.
	About half the bundle of documents that we are considering, which we should remember have been forwarded to us for debate by the European Scrutiny Committee—I see its Chairman rightly sitting in his place—relate to the proposed eastern partnership. Conservative Members broadly support the principle of that partnership, but it should be subject to greater scrutiny of the considerable financial implications that it would involve. Indeed, that point was highlighted by the European Scrutiny Committee. The other half of the documents broadly relate to UK and EU relations with Russia, not least as they have been affected by the events of August last year. It is on those elements that I would like principally to concentrate my remarks.
	The background is obviously the Russian invasion of Georgia in August 2008, which was, in many ways, an unpleasant throwback to some of the more regrettable episodes in European history. It not only violated international law, but, importantly, Russia's previously expressed acceptance of Georgian territorial integrity as expressed in numerous United Nations resolutions, most recently including resolution 1808, which was passed only last April with Russian support. Whatever one may think of Georgia's actions on 7 August, Russia used grossly disproportionate force in response, and by subsequently recognising its supported regimes in Abkhazia and South Ossetia, Russia is attempting to redraw the map of Europe by force to some degree.

Mark Francois: By parliamentary convention, I am required to thank the hon. Gentleman for his intervention, so I shall do that, not least as he is a fellow Essex colleague, but I disagree with him. I have to point out to him that the territorial integrity of Georgia was supported by a whole range of UN resolutions, which the Russians themselves had signed up to. Perhaps he seeks to overlook that material fact.
	The EU presidency, which was headed at the time of this crisis by President Sarkozy of France, showed admirable resolve in obtaining Russian agreement to a six-point ceasefire plan. One of the key conditions of this agreement was:
	"Russian armed forces to withdraw to the line they occupied before the start of military actions",
	which were their positions before 7 August. Given Russia's use of force, and its failure to abide by the EU ceasefire agreement, my party strongly supported the EU Council's subsequent decision on 1 September, referred to on page 94 of the bundle, to postpone EU negotiations with Russia on new a EU partnership and co-operation agreement until
	"troops have withdrawn to the positions held prior to 7 August."
	In that we also agreed with the Prime Minister, who, in his subsequent written statement of 10 September said:
	"We strongly support this decision",
	and
	"it cannot be 'business as usual'."—[ Official Report, 10 September 2008; Vol. 479, c. 128WS.]
	In addition, alongside the suspension of the negotiations, the EU undertook to conduct a review of all EU relations with Russia, the conclusions of which form a substantive part of the documents that we are talking about.
	However, despite all the Government's seemingly robust rhetoric condemning the Russian invasion, Russia was still in breach of the ceasefire terms when, only three months later, the Government supported the resumption of talks. The threat to keep the negotiations postponed had been clear, but when it came to it, it was not carried out. Let us be clear: Russia has not abided fully by the terms of the ceasefire. Specifically, it has not withdrawn its armed forces to the line they occupied before the start of military actions. Russian combat forces remain in South Ossetia and Abkhazia, significantly including places such as Akhalgori in South Ossetia and the Kodori gorge in Abkhazia—areas that were until recently ethnically Georgian and administered by Georgia before the Russian invasion, but which are no longer so, having been ethnically cleansed of their Georgian populations.
	Regardless of the planned contents of the talks, the very resumption of EU partnership negotiations is likely to have been seen in Moscow as something of a symbolic victory. It represents, to the Russians at least, a return to business as usual. Indeed, although the Foreign Secretary described the resumed talks as "hard-headed negotiation", it is worth pointing out that the Russian Government do not appear to share exactly that view. In fact, the Russian Foreign Minister, Sergey Lavrov stated only last week:
	"I think we have never worked so closely with the European Union in such issues that are indeed significant for both parties."
	 The Economist effectively acknowledged that Russian satisfaction last November, in an article entitled "Europe quietly caves in to agree to new partnership talks with Russia." I see that the hon. Member for Thurrock (Andrew Mackinlay) is chuckling away.

Bruce George: I believe that the House of Commons and the House of Lords can be quite pleased with themselves, because some excellent reports have been published on Russia and the EU by the Foreign Affairs Committee, the Defence Committee, which is going out to Russia and Georgia soon, the House of Lords European Union Sub-Committee and, of course, the European Scrutiny Committee. There is more than enough information available for us to make a judgment. It is difficult to make a judgment, however. I suspect, having heard some of the voices here today, that anyone who argues with scepticism about Russian developments will be treated with some contempt and indifference, if that is possible, but we have to look at developments, and I am not yet in a position to say—I would not venture to say it—that we are moving back into the era of the cold war.
	One has to spot trends, and if trends in Russia continue, we should be getting a little nervous. Although I really want engagement, that does not mean to say it should be a supine engagement. If Russia invades a sovereign nation, it should not just be given a little yellow card or five minutes in the sin bin and then be allowed to rush back into the mainstream. Russia has to realise that that cannot happen if it is responsible for the killing of journalists or has at least been complicit in their killing; restricts civil society and the rights of non-governmental organisations; conducts endlessly fraudulent elections; or is clearly responsible at some point in time for using energy as a weapon. As to the argument about whether it will use energy as a weapon, let us not be stupid; it has done so at least 10 times, the 11th time might be really serious.
	So yes, let us be prepared to talk, but let us also consider the way in which Russia deals with its adversaries or its friends who become adversaries. The transformation in what Russia is doing has been very considerable since the good Putin-Blair days. Is that the case because of us, or because of developments in Russia? We know that Putin said that the collapse of the Soviet Union was the greatest catastrophe of the 20th century. We are moving to a position in which, even if the alarm bells are not ringing already, they soon will be.
	We would like to deal with a country that is democratising, but a survey two years ago showed what people there thought of democracy and the system of government they preferred. Some 35 per cent. wanted to go back to the Soviet system, 26 per cent. preferred the current system, which is hardly democratic and 16 per cent. were interested in and supportive of western-style democracy. Others accounted for 7 per cent. and 16 per cent. had no opinion. At this stage, we are not dealing with a country that is yearning for pluralism. It is also a place where what passes for sovereign democracy is not sovereign democracy.
	I concur entirely with the two hon. Members who argued that Russia was playing with the European Union. It is doing it not just because of Prime Minister Berlusconi; let us read what was said recently in the RUSI publication about Mrs. Merkel. We should also look at what is happening in Greece. One or two countries in east and central Europe are complicit. Why? Is it because of history or because of economic optimism, or is due to fear of the tap being turned off? One thing is patently obvious to me: some people and Governments in the EU and NATO are espousing a Russian interest, which could make collective decision making in both those organisations virtually impossible.
	Developments in Russia are worrying. As I said, there is in essence a single party. No one can tell me that the other parties are part of a free-party system; it is basically a single mass party, although there is no longer a single mass ideology as there was under communism. There is very clearly a secret police, control of the mass media is at a high level and control of society is very considerable. I am afraid that Russian democracy, if it ever existed, is on the decline.
	I have headed many election observation missions over the last seven or eight years and my greatest anxiety is over the fact that the Russians have run crooked elections; they have always done so. If anyone thinks that Yeltsin did not run crooked elections, they have not seen the evidence. When we are dealing with Russia, we are not dealing with a country that is remotely democratic or even, I suspect, aspiring to be democratic. That is clear when we see what is happening to the media. My particular anxiety is about civil society, which is always merely a concept in Russia; it is being compromised by people being put in jail and intimidated, which is most regrettable.
	What of Georgia? Well, there are some supporters for the Russians. It seems to me that supporting Russia and saying that Georgia started it all is a bit like blaming Czechoslovakia or Poland for what the Germans did. It is so disproportionate—

David Wilshire: By a happy coincidence—I hope it is happy—I got back from Moscow at lunchtime today, having spent two days there. I was there with the president of the Parliamentary Assembly of the Council of Europe and with the four political party group leaders, finalising our report for a part-session of the assembly next week. That report is on the consequences of the war between Russia and Georgia and the steps taken by both sides to implement Council of Europe resolution 1633, which demands the very things that people in this House and elsewhere in this country have been saying must happen.
	I have been deeply involved in all these matters since the war broke out. That involvement has taken me to Tbilisi, Gori, South Ossetia and Moscow several times. All that experience has reinforced in me the belief that jumping to conclusions is usually a bad idea. Five months on, the scene looks really rather different. Five months ago, Russia started the fighting, on 7 August. I think the world community has now come to the view that the fighting on 7 August was started by the Georgians. Who knows? Nevertheless, the criticism of both sides—I stress it is of both sides—is genuine, proper and needs to be addressed.
	I did not want to speak on this matter. I do not want to talk tonight about who did what and when, or who is to blame and who is not. I should like to pick up on comments made in one of the documents before us:
	"The European Union has a vital interest in seeking stability, better governance and economic development at its Eastern borders."
	I can only say amen to that. There are all sorts of reasons why; the economic ones were mentioned earlier. Russia is the EU's third largest trading partner; half of Russia's overseas trade is with the EU; and 25 per cent. of oil and gas coming into the EU countries comes from Russia. That is a clear case, but again it is not the one I want to pursue.
	In the remaining few moments available to me, however, I want to focus on something more fundamental: whether our future security and our future prosperity are better with a stand-alone Russia or a Russia that is integrated into Europe. Russia is a country in transition. I support and agree with many of the remarks made by the right hon. Member for Walsall, South (Mr. George) about Russia's shortcomings; I have observed elections there as well. It is a country in transition from totalitarianism to democracy, and it is showing what a slow and difficult process that is. Russia has had Yeltsin chaos, the humiliation of a collapsed economy and the same financial crisis that we face. It is worth noting that unrest has already broken out in Vladivostok in respect of the financial crisis.
	My recent visit has convinced me that the hon. Member for Kingston and Surbiton (Mr. Davey) is correct that Russians are asking the same question: is it better for Russia to go it alone or to integrate? My assessment—it is a guess, as who knows what goes on in the Kremlin—is that the Kremlin leadership thinks that going it alone is the better way forward, but that a significant minority disagrees with that view. If we cut off dialogue with Russia, we cannot help that minority, which needs our help. If we want to see what we are calling for—an end to some of the nonsense and a better democracy—we need to help those in Russia who believe in that.
	Of course, that is not a call for business as usual. The Council of Europe investigation has made it blindingly clear to the Russians that we are not talking about business as usual; we are not even talking about a slap on the wrist. I understand only too well that if the international community does nothing, the Russians will have won, in a sense, if we want to talk in those terms. If on the other hand we do too much and try to kick Russia out of the world community—something we cannot do; the more I look at this matter, the more sympathy I have with the hon. Member for Thurrock (Andrew Mackinlay)—it will be as bad as doing too little. So it is not business as usual.
	One may rightly ask whether, if the Russians have a problem and want our help, that situation matters to us. I suggest that there are a fair few pointers. Let us consider the issues involved. One is security. Does not the Russia-Georgia episode, whoever is to blame, tell us that we ought to worry about the security of Europe? Another issue is the gas situation involving Russia and Ukraine. Does it matter who is really to blame? The situation ought to tell us that our prosperity is at risk if we do not become engaged in it. Yesterday's murders in Russia, which the hon. Member for Walsall, North (Mr. Winnick) mentioned, and the spread of criminality matter to the rest of us.
	Let me ask a final question. If the situation in Russia does matter, how can we help Russia to change? It is not keen on rapid change, which it has experienced twice recently. The Bolshevik revolution brought it chaos, and it did not much care for that rapid change; Yeltsin brought it change, and it did not much care for that either. So how do we help to bring about change? Do we do it by poking our tongue out, to quote the hon. Member for Thurrock? Do we do it by refusing to talk? Or do we do it by engaging, and helping those who want the same as us?

Mike Gapes: The European Scrutiny Committee and its Chairman are to be congratulated for bringing this issue to the House. For the reasons given by the hon. Member for Spelthorne (Mr. Wilshire), I think it very important for us to watch developments in Russia very closely.
	It is clear that the arrogance and cockiness of the Putin period could change rapidly if the rapid reduction in gas and oil prices continues. Russia has had huge surpluses for many years. Now it faces the major challenges of reconstruction, a population that continues to decline or remains stable and a need for foreign investment, yet it causes problems with its attitude and behaviour. The Russian stock market has been taken out of operation several times, and has seen some huge crashes in which oligarchs have lost billions. I believe that there may be people in Russia now who will be quite worried about how the public will react in the coming years.
	The Minister was right to refer to the need for a structured, regular dialogue with Russia, but that does not quite represent the permanent partnership arrangement that I think the Commission envisaged when it and the Council and Ministers agreed to reopen the process. The Minister will know that, as we made clear in our 2007 report, the Foreign Affairs Committee was sceptical, indeed doubtful, about the point of reopening those discussions. We thought that it might lead to endless disputes about values and about issues that are still unresolved, such as the systematic harassment of the British ambassador in Moscow, the closure of the British Council offices, and the way in which—my right hon. Friend the Member for Walsall, South (Mr. George) referred to this—non-governmental organisations, human rights activists and others have been harassed.
	As recently as December, the Duma passed new legislation that basically abolishes jury trial in a very large number of cases, and returns to the Stalinist period and the Bolshevik model for dealing with prosecutions. The definitions of people who are carrying out acts of treason could be interpreted to apply to anyone who speaks to a foreign journalist. If that is indeed the case, there are worrying trends in Russian society.
	My right hon. Friend the Member for Walsall, South quoted the statistics correctly. It is not surprising, if the term "democracy" is associated with the drunken disaster of the Yeltsin era, that when people see a strong man bringing order out of chaos, they start to think that that is better than what they had before. Given the association with a rise in incomes resulting from a global increase in oil and gas prices, it is clear that for eight or nine years things have been getting better and better for most Russians, but that will not continue indefinitely.
	Unlike China and India, Russia is massively dependent not on its own manufacturing or domestic growth or on foreign direct investment on manufactured goods and exports, but on the sale of crude commodities around the world. That makes Russia very vulnerable. We know that Russian society contains some very nasty political groups on the far right, including the Nashi group, who are supporters of President Putin but also support the people who carried out the attacks on the British diplomats in Moscow.
	In the time that remains, I want to touch on two or three more issues. The Commission document refers to the development of
	"a common position on Russia's proposal for a new European security order".
	President Sarkozy has finessed that, as it were, into some kind of super-OSCE consideration, perhaps involving a meeting at some point in the next few months, but the issue is not going to go away. It is a long-standing Russian ambition effectively to get rid of NATO by establishing an all-Russian security system whereby it becomes very weak.
	It occurs to me that the onset of President Obama today will pose some very difficult issues for the United States Administration. Like the hon. Member for Kingston and Surbiton (Mr. Davey), I attended the Democratic convention in Denver, and I was struck by the difference in the views expressed by Democrat academics on the panels when dealing with the attitude to Russia and Georgia. There is no consensus. I think that one of the important questions will be the direction in which President Obama's Administration goes when it comes to issues such as missile defence, in regard to which there is clearly a need—from the Russian point of view—for a change in the American approach. Will that happen, and if it does, will we see constructive Russian engagement with the United States with the aim of solving the problems in the middle east and working towards a resolution of the situation in Iran?
	Russia is an important partner and permanent Security Council member, and we also need good relations with her.

Gregory Barker: My right hon. Friend makes an excellent point about short-term rip-offs. Unfortunately, the combination that we have now is the worst of both worlds, as I shall explain a little later in my remarks. There is a total lack of long-term strategy and, as a result, short-term fare hikes are being made because of the failure to invest for the long term.
	Why have these huge national price increases been made? The Government have obliged the train operating companies to pay huge franchise premium payments, which can be met only by increasing the fares. In effect, that is another way for the Government to claw money from the public: in effect, it is another stealth tax. Why are the Government making rail travel so much more expensive at a time when Ministers preach to us that we should all be switching to public transport to lower emissions and reduce traffic congestion?
	Just this week, figures came out showing that, in terms of cost per mile, Britain's rail passengers are the most hard squeezed in Europe. Now, I do not expect fares here to compare with fares in Serbia, where £10 will take one 512 miles, but it does seem ridiculous that, in Britain, for the same money one can travel just 26 miles. In reality, the Government's mismanagement of our rail network over the past decade, and their failure to get costs under control, have meant that they have no long-term strategy to cope with the increasing demand for rail travel other than simply to price people off the railways by raising fares.
	Consistent under-investment and a lack of strategic vision have led to unfair price rises and to the taxpayer, yet again, bearing the brunt of the Prime Minister's sloppy financial management. Nowhere in the country is that more true than in my constituency and elsewhere along the East Sussex-Kent border, where commuters have borne price increases well into double figures. For example, my constituents who travel from Battle station into central London have suffered a 10.3 per cent. increase in the price of a weekly season ticket.
	Etchingham is another town in my constituency, and people who commute from there have suffered an 8.3 per cent. rise in fares. That is clearly above the national limit of 6 per cent., but it is also higher than even the 8 per cent. that had to be permitted by the regulator as "an exception" to Southeastern trains.
	So what is the justification for this extra cost? It is to subsidise the deployment of the Javelin train, on a line that will not even service any stations in my constituency. The pill becomes even more bitter for my constituents in Battle to swallow because they know that they are suffering fare increases greater than those being imposed at Ashford station, which at least will see the benefit of the new Javelin train.
	Nor is the Javelin train on the Ashford line an easy alternative, as some people at head office seem to think, because in fact Ashford is 34 miles from Battle. This all smacks of a cursory knowledge of our area on the part of those making decisions in London. The rises imposed by the Department for Transport in Whitehall singularly fail to understand the geography of East Sussex: it is centralised, top-down decision making of the worst possible sort.
	I understand and support entirely the need for new investment in our railways. Indeed, my party recently announced plans for a new national network of high-speed trains—British TGVs fit for the new century. In addition, I accept that our new carbon emissions targets, adopted in the Climate Change Act 2008, have give an even greater urgency and focus to the goal of modernising our transport networks.
	After 10 years of neglect and under-investment, with severe capacity shortages on our networks and with the Treasury already at historic levels of debt, the costs of this investment is necessarily borne by those who will benefit from improved services. Indeed, the Government's White Paper of 2007 enshrined the sensible concept that "the user pays". But that, in essence, is the problem and the gripe on our line, because my constituents are not the users of this new service.
	I do not object to the new Javelin trains—far from it. I welcome them, but why are my constituents being singled out to bear a disproportionate burden of the cost of that new investment? And to rub salt into the wound, rather than suffering fare increases to see an improved service on their own line at least, they are subsidising other areas. My constituents are paying over the odds and face the galling prospect of a deteriorating service on their own Hastings to Charing Cross line.
	My constituents are not alone. Amber Rudd, the hard-working Conservative candidate in Hastings, has made this point in her local campaign against the 10.39 per cent. price increases at Hastings and has written to tell me:
	"Each year local commuters have been stung by exorbitant increases in the price of rail travel. This year we are enduring an increase of over 10 per cent. But there is no corresponding improvement in our services—no more seats on the crowded trains, or faster travel to London. How long are Hastings residents to endure a deteriorating service at an ever increasing cost?"
	The figures bear out Amber Rudd's concerns. More than a quarter of passengers using Southeastern's services rate availability of seats as poor and complain about the company's handling of delays, more than a third rate their value for money as poor, and more than 40 per cent. criticise the lack of parking space at stations, an issue that is particularly acute in my constituency at Battle, Crowhurst, Stonegate and over the border at Wadhurst in the constituency of my hon. Friend the Member for Wealden (Charles Hendry). A staggering 50 per cent. rate the toilet facilities and availability of staff as poor.
	Can we expect any improvements? Hardly. In the past two weeks Southeastern has announced the axing of 300 jobs, so it seems unlikely that my constituents will suddenly find cleaner toilets or more helpful staff on station platforms. Even more seriously, my constituents frequently endure severe overcrowding on long journeys. Morning peak services average 14 per cent. of passengers standing, and capacities hitting 36 per cent. over the recommended load factor of the trains. The Government's response to such overcrowding seems to be simply to price people off the trains.
	My constituents have suffered declining quality of service and sustained price increases, despite the long-running campaigns to improve services led at a district level by hard-working local councillors to whom I pay tribute, such as Rother Councillor Ian Jenkins from Etchingham, and at county council level by the cabinet transport member Councillor Matthew Locke. Can the Minister explain to my constituents what the double-digit increases will be paying for on their line? Can the Minister explain why, when the Government claim to be trying to attract people on to the railways, it now costs less for two people to drive into London from my constituency than to take the train, even at the cheapest fares?
	The Labour Government seem to have no long-term strategy to fix the problem. They have pressed ahead with a policy of short-term franchises that has given operators no incentive to make long-term investments in infrastructure or rolling stock. Many carriages have a lifespan of 30 years plus. To expect standards to be maintained when franchise holders have as little as five years' interest in the business is naive and ridiculous, and it is the passengers who suffer. No wonder nearly a fifth of Southeastern's passengers complain about the upkeep of station buildings and the repair of trains.
	Parking provision has clearly had no strategic oversight. I frequently arrive at stations such as Battle and Crowhurst to find streets around the station choked with parked cars. Passengers often find stations unmanned, which, as well as being frustrating for those in need of information, means that some disabled rail users struggle to access the service at all.
	Is it not clear that we must re-evaluate how rail franchises are operated? We cannot just blame the companies. Longer-term franchises will give companies a sound business reason to make the long-term investment that is needed. In addition, squeezing rail companies for vast sums over short periods leads them desperately to cash-crop the consumers for five or eight years without making a significant investment beyond re-branding the timetables, before handing on a crumbling service to someone else.
	We must free franchise operators from constant Whitehall meddling. There is a pressing need to incentivise private sector investment in our railways. Given that Ministers now have more control over rail operations than was the case under British Rail, it is not surprising that operators are often hard-pressed to find reasons to stay in the sector for the long term. Longer-term vision, and more flexible franchises with a focus on customer satisfaction and quality of service, are essential.
	If we are to hit our 2050 emissions targets and enjoy the rewards of decarbonising our economy, rail must play a crucial role as it provides reliable low-carbon transport that is good value for money and enhances, not detracts, from the quality of life of constituents such as mine in Bexhill and Battle. We must put rail at the heart of a sustainable transport system and make the right long-term investments now to ensure that we have the transport system that we will need in future decades. However, if in so doing the Government tread unfairly on parts of the country, such as my constituency, that already rely heavily on these transport links, and if in these challenging economic times, they expect those areas to be unfairly and disproportionately penalised and to subsidise projects elsewhere after years of squandered public spending, they will punish the very rail users whom they profess to be making these investments to help.
	People in the south-east are no strangers to being ripped off by Labour. The Prime Minister is desperate to tell us about all the "real help" that he is giving hard-working British families. We have seen precious little of that in Bexhill and Battle. Will the Minister tell us what real help he will give in respect of rail fares on the Hastings line? How can he make them fairer and more proportionate? Can he assure my constituents that the past 10 years of strategic anarchy on our railways will come to an end? Can he explain why, despite claiming to have seen the light on high-speed rail, the Government have given no commitment that any new high-speed rail infrastructure will be built? Can he explain why, despite their pledge two years ago to introduce 1,300 new carriages—without which the National Audit Office has said overcrowding will continue to get worse—they have yet even to order that number, let alone bring them into service?
	Against that backdrop of failure, under-investment and lack of foresight, can the Minister claim to have a sensible and coherent strategy to provide a transport system that delivers value for money, let alone helps us reach our emissions reduction targets?

Roger Gale: I thank my hon. Friend the Member for Bexhill and Battle (Gregory Barker) for creating this opportunity for those of us who represent seats in the south-east to refer to a source of burning anger for our constituents.
	This is the third year in succession in which our constituents—my constituents travelling from Margate, and those travelling from Westgate-on-Sea, Birchington-on-Sea, Herne Bay and right across east Kent—have faced an above-average fare increase. We are told that that increase is necessary to pay for the bullet train to which my hon. Friend referred—the much-vaunted fast rail service that is going to speed the journey from Kent to St. Pancras. The advertising on Southeastern's website says:
	"New high speed train services from Kent to St Pancras...will dramatically reduce journey times."
	Oh no they will not. They might reduce the travelling time just a little from east Kent to St. Pancras, but my constituents do not want to go to St. Pancras—they want to go to Victoria, Cannon Street and Charing Cross. Coming in from the south of London, most of them, as the Minister knows only too well, do not work in north London; they work around Westminster or Victoria, or in the City around Cannon Street. They are used to catching a train to one of the riverbank termini and then walking, or even taking a fold-up bike and cycling, to work. My constituents are going to be made to pay higher prices to travel to a station they do not want to go to and then pay a tube fare to get back to the place where they actually want to be, thus adding time to their journey. The bottom line is that my constituents are going to pay more for less.
	The trains from east Kent are now slower than they were in 1927. I have looked at the timetable. It takes about an hour and 40 minutes to get by train from Thanet to London—a journey of about 70 miles. I am not a genius with figures, but that suggests a speed of between 30 and 40 mph, which is not very fast in this day and age. The high-speed link, we are told, will knock a few minutes off the journey time from east Kent to St. Pancras—but not to where my constituents want to be. I have travelled on this line previously; I am probably the only living person who has. British Rail—that shows how long ago it was—made the mistake of running an engineering train from Victoria to Ramsgate. It did that on old track, with old rolling stock, in one hour flat—60 minutes. To be fair, to enable that to happen it had to clear a path by moving two trains in front, but the point is that it can be done. Under these proposals, it will not be done and we are facing an above-average fare increase designed to pay for a service that my constituents do not want to use.
	In a letter to my commuting constituent, Sharon Reeve from Herne Bay, the customer relations team leader for Southeastern, Frances Maynard, wrote:
	"the 2009 increase for Southeastern 'regulated' fares (season tickets and many Anytime tickets) is based on the retail price index (RPI) plus another three per cent. This is the formula that was set by the Department of Transport when the franchise began in...2006.
	The July 2008 RPI figure is used, which was five per cent."—
	much higher than inflation now. She goes on:
	"So the average increase for Southeastern regulated fares is eight per cent. This is an average, so some will be more and others will be less."
	Surprise, surprise—for the Kent coast line it is more, as it was last year and the year before. Why? Because, says Frances Maynard:
	"Government's policy is for passengers to pay more towards the cost of their rail travel and taxpayers to contribute less. So as regulated fares increase the subsidy given by Government to Southeastern decreases."
	In the franchise briefing document issued by the Strategic Rail Authority before Southeastern took over the franchise, it was made plain that these increases and the Government's decrease in subsidy could be phased over the lifetime of the franchise. What Southeastern is doing—it is blindingly obvious—is loading the costs up front as far and as hard as it possibly can in order to get as much money in as quickly as it possibly can.
	Sadly, the Government have declined to make available the models for those fares and journey times, and for the number of trains running on those lines to individual stations—such as Victoria, Charing Cross, Cannon Street and St. Pancras—on the grounds that it might be commercially sensitive with regard to Southeastern and Govia. Govia is a good name because if someone wants to get to Cannon Street, Victoria, Whitehall or the City, they will have to go via St. Pancras, and then do so again on the way back home, to get where they wanted to be. That does not sound like progress to me.
	The Minister, who is a personal friend, has to come up with some answers. He knows the situation only too well because his constituents use the same line that mine us—they just catch it a bit closer to London where the trains are a bit more crowded. They, too, will get less for more and will have to travel to a station they do not want to go to. I suggest that his majority is—if he will pardon the pun—on the line, literally. In this case, it is the Kent coast line. When he replies, I hope he will explain to me how he will explain to his constituents who travel from Kent why they are being burdened with the costs of journeys they do not want to make.

Charles Hendry: I am delighted to support my hon. Friend the Member for Bexhill and Battle (Gregory Barker) in this debate. You will see, Mr. Deputy Speaker, on my Bench the epicentre of sensible transport policy for the Tunbridge Wells, Bexhill and Battle, and Wealden triangle; we are the people driving forward change and making sure that the interests of our constituents are well-represented. I agree with every word my hon. Friend said. What he said applied to many of my constituents. Many of them use the Hastings line. They get on at Frant or Wadhurst, but the train is often full by that time. They have to park a significant distance from the stations because of inadequate parking facilities in the area, and they are paying more for the privilege all the time.
	My constituency is served by three lines. The line to Hastings is one, the Uckfield line is another—one would be forgiven for thinking it a tourist route it is so slow; it takes about an hour and an quarter to do the 40 miles from Uckfield to London—and the third is the line down to Lewes and Eastbourne. Those lines present different problems, but the challenge for my constituents is that, as others have said of their constituents, they are paying more and getting less for it.
	We have to be fair to Southern. On the Uckfield line in particular we have seen a dramatic improvement in the quality of the service in the seven years in which I have been the MP. Since Southern took over the franchise, we have had trains that largely run on time, which are clean and which have friendly staff. The travelling experience on that line has been significantly enhanced, although that does not apply to the other lines in quite the same way. The consequence of that improved service is that the popularity of those lines has grown, and there is now significant overcrowding. People travelling from London down to Uckfield find that they may stand as far as Eridge or Crowborough. People getting on in the morning often have to stand for as much as an hour of the journey up to London. That is not an acceptable level of service for people to expect.
	If people were getting more in return for the money that they are paying, they would not mind so much, but we are not seeing the longer trains. We ought to have longer trains to accommodate the passengers who are using the services. We ought to be seeing more trains later in the evening, too, to ensure that people can come up to London and get back, having gone to the theatre or been for an evening out. We ought also to be seeing more regular trains. However, we are not seeing those improvements in the service; we are seeing a reduction in the service. On the line that serves the constituency of the hon. Member for Lewes (Norman Baker), which runs down to Polegate, where people in Hailsham would catch the train, people are seeing a reduction in the number of trains offered. The service continues to be chipped away at, when it should be being improved.
	One fundamental problem is that although people are paying a lot of money for their train tickets and a significant amount to park, they simply cannot park, because of the inadequate number of parking spaces available. On the Uckfield line, that problem starts at Uckfield, where we have 14 parking spaces. That means that people cannot park there, so they go up the line to Buxted, parking all around the village, causing huge amounts of disruption and damaging the interests of local businesses, because shoppers cannot park outside. The car parks will be largely full as far up the line as Eridge, where there will typically be 100 cars parked on the verges round the station, blocking people's driveways and causing huge inconvenience. If people are paying premium prices for the service, they should be able to expect the right investment to go into improving the overall travelling experience.
	Indeed, people in Uckfield do not even have a station at the moment. The previous station had to be removed because it had rats. The station mistress was attacked by a rat and the station was closed as an unfit place to work, but we do not have anything else. In spite of the huge amount of money that people are paying, they do not even have a station that they can use. We are told that if a new station were put on the site, we would have to find a significant amount towards its cost from local council tax payers, who are already hard pressed; but they should expect a station as of right.
	We are not getting the service that we expect, but there is another thing that I hope the Minister will address: this evening we are highlighting a problem that has got worse, but we are profoundly concerned that it will get worse still. We know that the Government plan to impose thousands of new houses on our constituencies over the coming years. They are not wanted. We recognise that there needs to be some additional new house building, but building on the scale proposed is absolutely without justification and will do massive damage to the beauty of our constituencies.
	What we are not getting, however, is the investment in the infrastructure to support those houses. The people in my constituency, in Bexhill and Battle, in Tunbridge Wells and elsewhere would be much more willing to accept the imposition of new housing on our constituencies if we felt that the investment in the rail infrastructure was going to be made to enable people to travel to where they need to go. What we have seen, however, in the discussions that we have had about reopening the rail link between Uckfield and Lewes, is that the Government's formula for the proposals means that we cannot secure funding to open just a 7-mile stretch of line that would significantly enhance the train service in the whole south-east.
	I ask the Minister not only to look at the problems that people are facing today, but to look forward and to try to reassure us that the Government are thinking about a sustainable transport policy. At the moment, we feel that we are constantly being charged more for the travelling experience, but that the experience itself is not getting better.

Norman Baker: I must stress that I am speaking in my capacity as a local Member for East Sussex, rather than in any Front-Bench role for the Liberal Democrats.
	I welcome the opening comments made by the hon. Member for Bexhill and Battle (Gregory Barker). I agreed with virtually every word that he said. This is an important issue, and it should affect all local MPs in East Sussex, Kent and elsewhere. I therefore share the disappointment that there are no Back-Bench Labour MPs here from any of the constituencies that are affected, such as those in Brighton and Hastings. However, 100 per cent. of the Liberal Democrat MPs from Kent and Sussex are here in the Chamber tonight.
	When I undertook a survey of my constituents in Lewes, Seaford, Newhaven and Polegate before Christmas to ask their views on the railways, there was general acceptance that the quality of the carriages had increased, that the trains were more reliable and —to echo the words of the hon. Member for Wealden (Charles Hendry)—that Southeastern seemed to have done a reasonable job with the railway. One concern stood out among the plaudits, however: the cost of travelling by train. That was the issue of greatest concern to 68 per cent. of those who responded to my survey.
	That is not entirely surprising. The formula referred to by the hon. Member for Bexhill and Battle, which pushes the cost of travelling by train up above inflation every year, is simply not acceptable in terms of value for money or the consequences for the rail passenger, who is caned every year. And it is certainly not sensible in regard to tackling the climate challenge that we all face. The right hon. Member for North-West Hampshire (Sir George Young) intervened earlier to point out that the formula used to be RPI minus 1, but that it is now RPI plus 1. It is the Government's policy to push up rail fares above inflation every year, and that is neither sensible nor defensible. It is even worse than that, however, because the cost of travelling by train increases even more for those paying unregulated fares, which have gone up beyond RPI plus 1. Although it does not affect my constituency, I also sympathise with the problem mentioned by the hon. Member for Bexhill and Battle with the consequences of the Javelin train in his part of the world.
	We are facing economic hardship at the moment, as all Members know. People are being made redundant and losing their jobs day after day. When such pressures have existed before, the Government have reacted. For example, in three years out of the past 10, they have reacted by freezing fuel duty for motorists, following hard campaigning, yet they have never frozen rail fares for passengers. There is one rule for the motorist and another for the train passenger.
	If we look at the figures for the past 30 years, we see that the cost of travelling by train has risen by roughly 70 per cent. above inflation in real terms in that period, and the cost of travelling by bus has risen by even more, but the cost of motoring has gone down in real terms. The rail passengers in my constituency ask why the Government occasionally freeze fuel duty when the cost of motoring is going down, when they never freeze the cost of travelling by train, even though it is going up beyond the level of inflation. The Government really need to get a handle on that. I suggested earlier this year that we should have a freeze on rail fares, which could have been paid for simply by cancelling 3 miles of motorway widening. That would have paid for a fares freeze this year, and if people were asked which they would prefer, I think I know what the answer would be.
	The cost of rail travel in this country is also high compared to that in other countries. The hon. Member for Bexhill and Battle kindly referred to some Lib Dem research—without mentioning that it was Lib Dem research—in his opening remarks. The cost of a journey in Serbia that is the equivalent of travelling from John O'Groats to London would get someone from here to Basildon in this country. Would Members rather be in John O'Groats or Basildon, in terms of getting value for money when travelling from London? That money buys a journey of 512 miles in Serbia, compared with one of 26 miles here. I am afraid that the Government are pricing people off the railways, and that is a transport policy that does not make sense.
	We need to recognise that more people want to travel by train. Some have no alternative, including the commuters in my part of the world, but many people want to travel by train. Trains are attracting more and more passengers, yet the Government's answer is either to force people off the railways by pushing the prices up or to allow the increase in cattle-truck conditions that we are now seeing on lines all around London and elsewhere in the country. More people are now standing for longer distances on trains and paying more for the privilege in the south-east and in my constituency. That cannot be right in any shape or form. As the hon. Member for Bexhill and Battle rightly said, the Government are extracting more money from the rail companies and, through them, from passengers in order to reduce the call on the Treasury purse. It is a tax on the railway passenger and it is also a tax on good environmental practice.
	My constituents in Lewes are very keen on protecting the environment—it is a major theme in my postbag—and they are saying that they want to travel by train and want to see the link increasingly made between carbon emissions and the price paid for a particular activity. How can it have become cheaper over the last 10 years to travel by air, with its carbon-busting implications, and far more expensive to travel by rail, when we surely want to see the opposite occurring if we are going to tackle climate change? How are the Government going to reach their target of 80 per cent. carbon reductions by 2050 when the transport sector contributes about a quarter of our emissions and the Government's policy is to deter people from using lower-carbon means of transport? That simply does not make sense.
	My constituents also tell me that if they have to pay above inflation for their train tickets, the deal must be that they get a better service in return—not a service somewhere else in the country, but a service for people in Lewes who have to pay for tickets on their particular line. The reality is that the service is getting worse, with overcrowding and with the new timetables having not been well received in my constituency either. Journey times are getting worse and the service is getting more unreliable. The Government's interfering with the Gatwick Express timetable has also thrown the whole thing out of kilter, making it difficult for trains to run on time and meet their punctuality targets.
	Neither has the situation been helped by the Government's failure to invest in enhancements. It would be something if my constituents could see enhancements in return for the ticket prices that they have to pay, but we are not seeing that. We are not seeing the Lewes-Uckfield line reopen; although it has massive support from all three parties locally, all the local MPs and local councillors of all persuasions, it is not on the Government's agenda. We are not seeing any efforts made either to tackle the dreadful overcrowding between Brighton and Ashford. Diesel trains—two-car diesel trains—go through my constituency and that of the hon. Member for Bexhill and Battle, but regular announcements at Lewes station warn people not to get on the train because it is too crowded. They are told to wait for the next one, even though it is an hour away on that service. Unless the Government want to resort to having Japanese-style employees to push people on to trains, they should seriously address the issue and get some more carriages. Yet there is no indication of that. Southern wanted more carriages and the Government blocked them. That is this Government's record on local services in my constituency. If we are to have rail fare increases above inflation, let us have some improvements to the service to justify them.
	One thing that the Government could do with the Southern franchise is eliminate some of the padding in the timetable. My constituents tell me that they are fed up with waiting nine minutes at Haywards Heath for the trains to split or to join, when Network Rail requires only three minutes operationally to do it. My constituents are fed up with waiting three minutes at Clapham Junction because the trains arrive too early and do not want to go to Victoria when no platform is available. My constituents are fed up with going to Polegate, arriving at Lewes on the way back and waiting seven minutes there for the trains to depart. There is so much slack in the timetable in order to ensure that the train arrives on time that the punctuality figures have, of course, improved dramatically. The shortest journey time from Lewes to London in 1989 when I began commuting was 53 minutes on a slam-door train. The shortest journey time now is one hour and three minutes, and the average journey time is one hour and nine minutes. There is padding in the service. If fares are going above inflation, we need to improve the service as well.
	I am grateful to the hon. Member for Bexhill and Battle for providing the opportunity to raise this matter tonight and I thank him for his contribution. I note the support from both Opposition parties for a more sensible strategy. I note the support from elected people and, indeed, from unelected people: I have never heard of this Amber Rudd; she sounds a bit like a rail signal of some sort, but I am sure she is campaigning very actively for improvements, just like the rest of us.
	Let me end by making a political point. If the Government want to rescue some of the 13 seats in the south-east that they are in danger of losing at the next election—they are all quite marginal, including the Minister's—they had better start delivering on some of the issues that are important to people in the south-east, such as train fares. They have not done that so far.

Christopher Chope: It is a pleasure to follow my hon. Friends' excellent contributions to the debate. Although my constituency is just in the south-west, the incremental basis for fares means that ours are determined by those that South West Trains set in the south-eastern part of its line, up as far as New Milton. Much as people might like to start their journey to London in Hinton Admiral, and pay less than the cost of the journey from New Milton to London, they have to pay more. I therefore believe that I have a legitimate interest in participating in the debate.
	In the south-east, train fares between New Milton and Waterloo have increased significantly above the rate of inflation because of the Government's policy of using a stealth tax against a captive commuter population. Although there are nothing like as many commuters to London from my constituency as from some of my hon. Friends' constituencies, the position of those commuters in the current economic climate is dire. They cannot afford to pay such increases out of their taxed income.
	I can imagine the Under-Secretary asking why those commuters do not move closer to London. That would involve selling their houses in a difficult market, and having to buy another house, thus incurring the steep penalties that the Government have imposed on house buyers through increases in stamp duty. Those people are squeezed all round. One might ask why they do not try to get a job more locally, but in the current climate, anyone who has a job wants to hang on to it, and not risk losing it in the hope of getting another somewhere else.
	The position of my constituents, like so many others, is that they are captive customers of the railway system. The Government are behaving uncharitably in the current climate in imposing above-inflation fare increases on those people. I have talked about regulated fares, but the increases in unregulated fares are even greater.
	I would like the Under-Secretary to deal with access to unregulated fares. Some of the best bargains on the railways can be obtained by going to the ticket office and saying, "I want to travel next week;"—or next month—"what's the best deal?" However, that depends on the ticket office's being open during advertised hours. I went to the ticket office at Hinton Admiral to try to get a ticket to go to Scotland. Although the ticket office should have been open—it is not open that often—it was shut. I then went to Christchurch, and I was lucky because there was only a small window of opportunity due to that ticket office's being manned for six hours a day. That is completely contrary to the Government's agreement with the franchisees—South West Trains being the franchisee in this case.
	Something bizarre is happening. A consultation about ticket offices' opening hours took place. In advance of the results, South West Trains withdrew staff from the ticket offices and reduced the opening hours so that they were even shorter than those for which it had sought permission. That makes a mockery of the Government's consultation. I hope that the Under-Secretary recognises that ticket offices that are open regularly are fundamental for people who want to take advantage of the best deals on the railways. Commuters who use unregulated fares and travel off peak are penalised if they buy their ticket on the day. People in my constituency therefore understandably prefer to book in advance if they can. To do so, they must have a system that allows that to happen. That means having a ticket office that is open regularly.
	I make a plea to the Under-Secretary to tackle the problem, and to consider the longer-term consequences of imposing stealth taxes on a captive commuter population. I hope that, even if he has no Back-Bench support this evening, he will show some sympathy for our hard-pressed constituents.
	 Motion lapsed (Standing Order No. 9(3)).
	 Motion made, and Question proposed, That this House do now adjourn.—( Mr. Watts.)

Paul Clark: We have had a good and wide-ranging debate, and I am delighted to congratulate the hon. Member for Bexhill and Battle (Gregory Barker) on securing it, because it has given us a real opportunity to discuss the issues facing rail operations in the south-east. As has been shown today, he, like many other hon. Members, has a keen interest in the subject. I include the hon. Member for Croydon, Central (Mr. Pelling), who said that some Labour colleagues whose constituencies lie to the north of his had been arguing about rail travel. I assure him that other hon. Members have raised various issues, including my hon. Friend the Member for Hastings and Rye (Michael Jabez Foster), who just before Christmas addressed regeneration and travel in his constituency.
	I intend to deal with as many of the points raised as fully as possible in the time available, but I must say at the outset that over the decade that we have been in government there has been a 50 per cent. increase in the number of people travelling on the railways. Secondly, unprecedented levels of investment have gone into our railways, day in, day out, to rectify the substantial underinvestment that had lasted for decades. In addition, there has been investment in rolling stock, and in High Speed 1, which has been pilloried by Conservative Members. It was the first new railway line to be built in this country in more than a century, and it was delivered on time and on budget.
	I remind right hon. and hon. Members that my right hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), who was then the Deputy Prime Minister, came to the House to announce the renegotiation of that contract, because it was in a mess when we picked it up. He ensured that we ended up with a high-speed line that is providing essential services to businesses and individuals in the constituencies of Members who have spoken in the debate. It is used for leisure and business purposes, and it brings us into the 21st century.
	Let us remember that the privatisation of the railways happened in 1995-96. I noted carefully the comments of the right hon. Member for Tonbridge and Malling (Sir John Stanley) about why he did not support his own party's Government on the privatisation Bill, to which I shall return shortly. Since the privatisation was forced through, contracts have always governed what rail operators that are private companies can and cannot do. We have sought to renegotiate those contracts to end up with a balanced situation with better punctuality, better reliability and more investment. There is also regulation of fares—we have not abandoned that requirement.
	We have sought to find a balanced position, and the current position answers many of the points made by Opposition Members. Those who have been honest have said that their constituents say, whether in surveys or to them in person, that there have been improvements to the service that we provide, to rolling stock and to reliability. I shall come to the issue of "padding", which the hon. Member for Lewes (Norman Baker) mentioned. Such improvements cannot happen without investment in the rail services that are so important to the constituents of the Members present, including mine in Gillingham and Rainham.
	We have limited most fare increases to an overall RPI plus 1 per cent. cap. However, that cap is applied to a group of fares called a basket, and individual fares may increase by up to 5 per cent. more than that as long as the overall cap is not exceeded. I emphasise that it is a cap—it is up to the individual train operating companies, and they do not have to increase prices by that much. They have that flexibility to vary fares in their fares basket, allowing an increase of up to 5 per cent. above the overall cap.
	There are two exceptions to that. Southeastern has a higher overall cap of RPI plus 3 per cent. for five years from 2007, in recognition of the fact that almost £693 million has already been invested in new trains for Southeastern passengers and in the infrastructure needed to support them. Those are not the high-speed trains that are coming into service in December but replacements for the old slam-door stock. The only Member to refer to that old stock in his contribution was the hon. Member for Croydon, Central, but I am sure I do not need to remind Members that Southeastern services had some of the oldest rolling stock. The old slam-door stock from the 1960s and '70s was unwanted by our travelling constituents and by those who used the services. That replacement hds to be paid for in a sensible way. The current regime also addresses the historically low fares on Southeastern, normalising them with those for similar services.
	The right hon. Member for North-West Hampshire (Sir George Young)—I am sorry that he is no longer in his place—said that the cap used to be RPI minus 1 per cent. Indeed, it did. I could take hon. Members back to the days when a franchisee invariably missed targets, which meant that every time targets were met for season ticket holders, they got a 5 per cent. rebate and the subsidy from the public purse went up. All the time that that was happening, there was a reinforcement of the under-investment in our rail service that, with due respect, we got so used to under the Government led by Conservative Members during those years. That was the situation we faced with the service on the Kent and Sussex lines. There had been substantial under-investment and the franchisee moneys that were coming in through the fare box were falling as a result.
	Hon. Members should not think that Southeastern is the only company to have a franchise set at RPI plus 3 per cent. Indeed, the other exception is the Northern Rail franchise for the West Yorkshire passenger transport executive area, where fares, for similar reasons, are set at RPI plus 3 per cent. Leeds fares have a higher cap, like those for Southeastern, from 2007 until the end of the Northern franchise and that money has funded investment in additional trains in and around the Leeds area.

Roger Gale: The Minister has referred to an increase in some services from some places. Will he accept that from east Kent there has been a diminution of the services to Victoria and Cannon Street?